How to avoid disappointments when dealing with labour only building contracts?

Introduction

Clients who intend to execute building projects can either utilise supply and fix arrangements, whereby the builder/Contractor brings in materials, labour, equipment and everything necessary to bring the works to completion. With the Client only left with the obligation to pay the Contractor for labour and materials. Another option is a labour only arrangement , whereby the Client buys materials and the Contractor supplying labour and “equipment”. The labour contract has some grey areas that can potentially create different expectations, which can result in conflict situations between the Client and the Contractor and these need to be ironed out beforehand. From the above, three things ought to be clarified, first, the meaning of materials and secondly what labour only is and finally who supplies everything else which is not materials or labour only.

1. The meaning of materials

For the purposes of this article, materials can be defined as items that will “permanently” stick to the structure or that will stay with the structure owner when the construction project is complete. Examples could be things like cement, brick, sand and so on. One may also add water to the list, though it will not be tangible when the building is complete. This is because water helps to convert most materials into usable form. That being the case, it follows that, depending on the arrangements between the parties, the Client can take responsibility for the storage and security of his/her materials.

2. Is it labour or labour only?

The inclusion of the word only after labour is often misleading. Apart from providing manpower, one would, and reasonably so, assume that the Contractor should feed the employees. It seems as if, the meanings of materials and labour have been clarified, and the respective responsibilities of the Client and Contractor, but what about everything else that is neither materials nor labour.

3. Who supplies everything else

Everything else can refer to equipment (scaffolding, formwork etc), machinery (compactors, generators etc) and tools (wheelbarrows etc). Whose responsibility is it, between the Client and the Contractor, to supply “everything else”? Failure to clarify this area often creates disappointments when one party feels let down by the other. It is important that when the Contractor submits a quotation, clarity be given on whether or not “everything else is included”. Similarly, it is part of the Client’s due diligence process to interrogate what a labour only quotation mean.

Conclusion

The choice of who provides everything else is entirely dependent on two contracting parties. At times the Client may at their own discretion opt to do so. However, where the Client is silent, the Contractor ought to include in their pricing, everything else that is necessary to execute and complete a construction project and avoid “surprising” the Client. Before accepting a labour only quotation, it is prudent that the Client seeks clarification on the supply of everything else, otherwise a cheaper quotation may end up being expensive in the long run due to certain grey areas.